Tariff Barriers In Alberta's Beer Market Are Still Unconstitutional

Derek James From
Derek James From is a staff lawyer with the Canadian Constitution Foundation. www.theccf.ca

Dave Shafer via Getty Images

Capped beer bottles in the filling room

In a flourish of self-congratulatory bravado, Finance Minister Joe Ceci announced yet another major overhaul to Alberta's brewing industry on July 28, 2016.

Prior to the NDP taking power in 2015, Alberta enjoyed the best market for beer in all of Canada. Although, it was by no means perfect, Albertans were able to enjoy a far greater selection of products from around the world at a much more competitive price than any other consumers in any other province.

Then the tinkering started.

No province is permitted to erect a "tariff barrier" -- a tax assessed by weight, volume, or a percentage of value -- that impedes interprovincial trade.

Behind the scenes, for years, members of the Alberta Small Brewers Association had been lobbying the government in Edmonton to protect them from outside competition and provide financial supports. These efforts fell on deaf ears until the current political regime took office.

As a result, the first major overhaul took place October 28, 2015 when the government imposed a tax on craft beers brewed outside of the New West Partnership (British Columbia, Alberta and Saskatchewan). This tax violated both our constitution's so-called "free trade" clause and long established case law from the Supreme Court of Canada. No province is permitted to erect a "tariff barrier" -- a tax assessed by weight, volume, or a percentage of value -- that impedes interprovincial trade.

As intended, the tax drove up prices on beer from outside the New West Partnership. But the increase in price failed to further the government's goals of supporting local jobs and diversifying the economy -- the mantra constantly intoned in Edmonton these days.

Muskoka Brewery was forced to pull out of Alberta entirely and lay off their Alberta employees. Steam Whistle Brewery languished under a 525 per cent tax increase and was forced to ask the courts to provide relief. Some of the small Albertan import agencies saw their sales drop by nearly 60 per cent. And since B.C. beers were exempt, producers from across the Rockies began shipping more than ever into the Alberta market.

Far from protecting local jobs and diversifying the economy, the October 2015 tax cost Albertans' jobs, made businesses less-profitable, and flooded our market with products from outside the province.

Back to the drawing board.

The second major overhaul was announced July 28, 2016. As of August 5, 2016, all beers in Alberta will be taxed at the highest rate regardless of their place of origin and Alberta brewers will be subsidized by taxpayers based upon the volume of their sales.

But this does precious little to remedy constitutional problem created by this government last fall.

Section 121 of the Constitution Act, 1867 says that products from each province must be "admitted free" into every other province. When reading the many drafts and revisions of this provision in the years leading up to 1867, it is clear--the Fathers of Confederation wanted to tear down all government imposed impediments to internal trade.

For example, George Brown said, "[the] Union of all Provinces would break down all trade barriers between us, and throw open at once... a combined market of four million people." And Alexander Galt said one of "the chief benefits expected to flow from confederation [is] the free interchange of the products of the labor of each province."

And this is why latest announcement rings so hollow. Alberta brewers will receive taxpayer money on a volume sold basis to offset their costs, which is merely an indirect means of imposing a tariff barrier on beer from elsewhere in Canada.

Ignoring the political hullabaloo, Alberta's new plan is to do covertly what it is not permitted to do openly. No court will have difficulty seeing through this sleight of hand.